On February 2, 2011, the Centers for Medicare and Medicaid Services (CMS) issued a final rule implementing the new Patient Protection and Affordable Care Act (PPACA) "proactive fraud prevention" measures for Medicare, Medicaid and the Children's Health Insurance Program (CHIP), including new provider screening and enforcement tools such as suspending payments in cases of suspected fraud.

The final rule establishes requirements for suspending payments to providers and suppliers based on "credible allegations of fraud" in Medicare and Medicaid. Although the definition of "credible allegation of fraud" includes allegations from any source, including, among others, civil false claims cases and fraud hotlines, CMS believes the statutorily required consultation between CMS and the OIG prior to implementing a payment suspension will provide ample opportunity for the credibility of an allegation to be assessed and for a preliminary investigation into the allegation of fraud to occur sufficient to meet a reasonable evidentiary standard. CMS reiterated that "this authority will be exercised judiciously by CMS, in consultation with the OIG, and that only in the most egregious cases will payment suspensions last longer than the previously established timeframes for payment suspensions."

Under the final rule, CMS also will apply three levels of screening tools: (1) "limited risk" providers, including, but not limited to, physicians, nonphysician practitioners and medical groups or clinics, will have enrollment requirements, license and database verifications; (2) "moderate risk" providers/suppliers, including comprehensive outpatient rehabilitation facilities, independent diagnostic testing facilities and currently enrolled home health agencies, will have the above verifications plus unscheduled site visits; and (3) "high risk" providers/suppliers, including prospective durable medical equipment, prosthetics, orthotics and supplies suppliers and home health agencies, will have verifications, unscheduled site visits, criminal background checks and fingerprinting. States may rely on the results of the Medicare screening process for providers and suppliers that also are enrolled in Medicaid or CHIP.

The new screening procedures are applicable to newly enrolling providers and suppliers, including eligible professionals and those providers and suppliers currently enrolled in Medicare, Medicaid and CHIP who revalidate their enrollment information beginning on March 25, 2011. These new procedures are applicable to currently enrolled Medicare, Medicaid and CHIP providers, suppliers and eligible professionals beginning on March 23, 2012. Based on comments provided to the proposed rule published September 23, 2010 , CMS eliminates the distinction between (1) publicly traded and nonpublicly traded companies and (2) government-owned and non-government-owned ambulance companies for purposes of the screening levels. CMS declined to apply the provisions of the final rule to managed care plans and organizations because there are a large number of other regulatory provisions that form the framework for oversight of managed care plans, and CMS did not wish to duplicate these requirements. To pay for this increased screening, a $500 fee will be imposed on most providers/suppliers enrolling in Medicare, Medicaid and CHIP for the first time, as well as currently enrolled entities revalidating their status. CMS is only accepting comments on limited areas, including methods that can be used to ensure the privacy and confidentiality of the records generated pursuant to adopting the criminal history records checks and the effectiveness of such checks.  

The final rule also establishes the authority for imposing a temporary moratorium on Medicare, Medicaid and CHIP enrollment on providers and suppliers when necessary "to help prevent or fight fraud, waste, and abuse without impeding beneficiaries' access to care." Any temporary enrollment moratorium will be announced in a notice in the Federal Register that will include the rationale for the imposition of the moratorium, the particular provider or supplier type or the establishment of new practice locations of a particular type in a particular geographic area.

The final rule also indicates that CMS is in the process of developing a new Notice of Proposed Rule Making incorporating the compliance plan provisions and comments that will be published at a later date.